Income reigns supreme in the investment company universe

Income was the overriding theme in the investment company sector last year and our latest research suggests this is a trend that shows no sign of abating. A number of companies have sought to raise their dividend this year, with many already on a premium. 

Some £1.61bn has been raised so far in 2012, according to analysts at Winterflood Investment Trusts, of which £415.9m was through new issues. 

Of the existing companies issuing new shares, a large proportion of these are income-orientated, with £490.4m coming from the high-yielding infrastructure sector. 

Again highlighting the popularity of income mandates, one of last year’s new issues, Diverse Income Trust, has announced plans for a C-share issue. 

There have been two new issues so far this year: Alcentra European Floating Rate Income, which launched in March, raising £81m, and BlueCrest BlueTrend, which also launched in March and raised £165m.

Due to demand for the company’s shares, BlueCrest BlueTrend has published a prospectus that will permit the issue of ordinary shares and C-shares over the next 12 months. 

In a US election year, May saw Edinburgh US Tracker not only change to an active mandate, but also adopt an income approach, changing its name to The North American Income Trust to reflect this policy change.  

Another investment company to enhance its dividend was JZ Capital Partners, which announced a new dividend policy to "provide regular and more predictable distributions at a rate of 3 per cent of NAV per year, implying a yield at the discount (as at 16 May 2012) of 4 per cent".  

Also in the Private Equity sector, Aberdeen Private Equity announced in June that it has adopted a dividend policy to return 10 per cent of distributions received each year, subject to a minimum of 1p. As a result, a dividend of 2p has been declared, which represents a yield of 3.4 per cent. 

The board of BlackRock World Mining Investment Trust, in Sector Specialist: Commodities and Natural Resources, also announced a sharper focus on distributions in the future by enhancing the company's dividend-paying capacity, which it believes will broaden the demand for the company’s shares and have a positive impact on the rating.  

According to Winterflood Investment Trust analysts, some £437.2m has left the sector in total this year through share buy-backs, whilst a further £387.2m left the sector through tender offers and capital redemptions. 

Commenting on the findings, Annabel Brodie-Smith, communications director at the AIC, said: "Income continues to be an enduring theme in the investment company sector. It’s interesting to see that income-focused investment companies, including infrastructure ones, which tend to be high yielding, are dominating issuance." 

"Meanwhile, a number of investment companies are increasing their dividend partly to help address discount levels. Despite the volatile market conditions we have seen so far in 2012, there appears to be plenty of activity in the sector, even if new launch activity has been subdued."